November 29, 2014
Pending data bring doubts over price index
Economists ask INDEC statistics bureau to reveal more details of methodology
Even though three months have elapsed since the government unveiled its new nationwide consumer price index, doubts remain among economists over the inflation figures since several details of the INDEC statistics bureau’s methodology are still unknown. At the same time, the gap between the official and inflation rates as reported by private economists continues to widen every month.
Prices of the goods surveyed to measure inflation have not been included so far in January, February and March reports as well as the basic and total food baskets, which are used to measure poverty and destitution and were usually published every month together with the consumer price index. More expensive baskets would have meant a raise of poverty and destitution figures, something that would have probably overshadowed the new index.
“All the changes done were positive but I would have preferred a more organized transition. There’s still a lot to do and this was just the first step,” Fausto Spotorno, economist and director of the Economic Studies Centre at the Orlando Ferreres consultancy, told the Herald. “The inflation figures are OK but they have to release the methodology details and the food baskets. I don’t know what they are going to do with that.”
The new inflation index, revealed in January with a 3.7 percent inflation, tracks prices on a basket of 520 goods and services, including food, drinks, clothing, housing, home appliances, healthcare, transportation, communication, recreation and education. It covers 200,000 prices across the nation in six main regions: Patagonia, North East, North West, Cuyo, Metropolitan Area and Pampeana.
The main element of information to build the new index was the 2012 national survey of household spending, which explains how and how much people spend nationwide. The old index was built on the 2004 version of the survey, which was considered outdated and because of that it was changed.
“The credibility of INDEC is still questioned since the data manipulation wasn’t only on the inflation figures but also on the gross domestic product, foreign trade and on the national survey of household expending,” Luciano Cohan, chief economist of Elypsis consultancy, told the Herald. “Improvements have been made but there’s still information being hidden by INDEC over its methodology.”
According to the INDEC statistics bureau calendar, a complete report over poverty and destitution will be published this month but it will include only data of the second quarter of 2013. The first numbers of 2014 will see the light in September, giving INDEC more time to adapt to the new data reality.
“INDEC was able to recover its credibility but it still needs to give more details of its methodology. There’s a long way to go for all opinion to converge in favour of the statistics bureau’s figures,” Mariano Kestelboim, University of Buenos Aires economist, told the Herald. “Changes have to be made also on industrial production figures and other areas as well.”
A wide gap
January’s inflation at 3.7 percent meant a steep jump compared to the 10.9 percent inflation reported by INDEC for all 2013 with its old methodology. Nevertheless, the so-called Congress Inflation Index, which takes an average of the estimates issued by private consultancies, said January’s inflation was 4.61 percent. A similar gap was then reported in February with the official inflation at 3.4 percent and the Congress Inflation at 4.3 and now in March with a 2.6 percent vs 3.3 percent inflation.
Economists told the Herald the differences were due to different methodologies used to measure price variations and anticipated the gap could come to an end in a couple of months.
“The gap between the consultancies and the INDEC figures can be explained due to a different methodology used. Nevertheless, in the long-term both figures will be very similar,” Spotorno, whose consultancy reported similar inflation figures than the official ones, said. “The gap will last only a couple of months more.”
In a recent report of Elypsis consultancy, Cohan said the gap happened because a much more importance given in the INDEC reports to the products of the Price Watch programme than to the ones not included in it. That explains why the gap between Elypsis and INDEC figures is much wider on areas such as food and drinks than in others which have no price agreement products.
“When measuring product prices, INDEC gives more importance to the ones included in the Price Watch programme. That’s why there are still differences between the official and the consultancies figures,” Cohan said. “Food and drinks and other goods and services are the areas surveyed by INDEC with most of the price agreement products and that’s where we see the main differences.”